The best credit card for you

Published: Wednesday, Oct. 24, 2012 11:27 a.m. CST

By Editors of Consumer Reports

On the surface, the HSBC Platinum MasterCard with Cash or Fly Rewards and the Capital One Venture card seem comparable, Consumer Reports notes. If you like to travel, you might find their pitches enticing: Both let you earn points that you can use for plane tickets. But a cardholder charging $1,500 a month would get $460 worth of points in the first year with the Capital One card and only $180 with HSBC’s card.

Many credit cards have complex formulas for determining how much cash or how many points you’ll earn. Some cards come in two versions: one with no annual fee and another with a fee but higher rewards. To help you make sense of the wide range of credit-card deals, the Consumer Reports Money Lab developed a computer model for evaluating cards. It takes into account the total costs of carrying and transferring a balance and estimates the rewards you stand to earn based on your spending patterns. It tracked down the terms of 53 mass-market credit cards and used the calculator to determine the best ones for three types of users: families looking for cash rewards, leisure travelers who want free trips and cardholders who carry a balance.

Findings include:

• Rewards cards offer tempting sign-up deals to consumers with good credit scores. If you haven’t compared your cards with what’s available now, you should.

• Mass-market airline cards are offering perks —travel insurance and free checked baggage, for example — that used to come only with high-fee premium cards.

• Although zero percent transfer cards seem enticing, especially if you have a big balance to pay off, a low-rate card might be the better deal in the long run.

NEW TRAVEL-CARD PERKS

Up-front bonuses of 25,000 to 40,000 points have become common among travel cards, and occasionally you’ll see a juicy 100,000-point offer. Travel cards often charge annual fees, though many are waived for the first year. But the perks that come with many airline cards — expedited security clearance, priority boarding, free checked luggage and access to airport lounges — can more than make up for the fee.

But don’t assume that cards offering a 25,000-point sign-up bonus will get you anything more than a one-way ticket. You might need to spend up to 50,000 points for a domestic unrestricted round-trip ticket.

CONFUSING DEALS

Be sure to read all of the fine print on any offer you’re considering. Here’s what Consumer Reports recommends watching out for:

• Spending tiers. Some rewards cards require you to spend a certain amount to get the advertised perks. Watch for phrases such as “up to” in card offers.

• Hidden caps. Some cards, including some gas cards, reduce the reward percentage after you’ve spent a set amount.

• Expiration dates. Check for them on rewards, especially with travel cards, because it often takes a long time to get enough points for a ticket.

• Missed-payment penalties. Some cards take away your month’s rewards if you miss a payment, and they might charge a fee to reinstate them. The Discover More card, for example, takes away all of your points if you miss two payments in a row.

• Changes in terms. Avoid surprises by reading the notices that come with your monthly bills for changes in fees, rates, credit limit or rewards programs.